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7/12/08

Some pretty dire news out of La Libertad, North Peru today. Miners have been on strike there since June 30th demanding pay owed to them by the company "Marsa" (Minera Aurífera Retamas Sociedad Anonima aka 'Retamas') a gold miner employing some 2,000 workers and milling around 1000tpd. This strike is separate from the union-backed strike in Peru this month.

Although reports are still rather confusing and both sides seem to be spinning events to suit themselves, there was some kind of confrontation when 200 police approached the striking miners' base camp near the mine gates. As a result six strikers were hit with live rounds by the police. Miguel Yupanqui Ramos, aged 23, was hit in the chest and later died from his wounds. One other is in critical condition in hospital. The other four injured are not in serious condition, I'm happy to say. They were simply shot by the police for staging a strike, I'm very very unhappy to say.

Why does the world pick on Evo Morales so much? I mean, we're talking about the President of the least influential country in South America here. A landlocked country that hasn't gone to war with anyone since Chile successfully stole a chunk of land from them. As for Evo, how can you get all hot under the collar about a dude with that haircut? And that taste for chunky sweaters?

So why the vitriolic obsession with Bolivia and Evo? If it were just the left wing politics, then we'd hear a whole lot more about plenty of the little Central American states, wouldn't we?

Or perhaps it has something to do with this:

Since Evo took office, Bolivia as a country has finally felt the benefit of being sat upon the second largest reserves of natgas in Latin America. Each bar represents one month's worth of revenue to the state, and to put it in perspective, that means Bolivia earned over twice as much in the month of February 2008 than it did in the 24 months 2004 and 2005 combined. And before you start talking prices, we're talking natural gas in Bolivia and not crude oil. Although natgas has also spiked recently, it did the same back in 2005.

That spike benefitted Bolivia to the tune of zero dollars and zero cents.

And not only that, but the Morales gov't is using the money pretty wisely by tucking a lot of it away in Central Bank reserves...

....and also making sure they don't overstep spending, as the public sector current account ran at a U$280m surplus for the first quarter of 2008 (which just continued on from the 2007 policies). All the figures are available right here. Y'see, all this loot used to go into the pockets of the foreign oil companies. And they don't really like that. And they'd like to start doing it again if they can.

Today I got another mail about the Ecuador mining issue. Although I'm not going to make this kind of post a habit, it's the weekend and let's indulge one more time by answering via the blog. Reader "S" asked the following two questions:

Do you think the share price will move up significantly once the mining law is published?A lot people seem to be concerned about the article in the Ecuador Mining News with Silvia Santacruz, Deputy Minister saying that the windfall tax will be in the new law, your thoughts?

This is a link to the article S was referring to, and if you haven't read it already (or if you haven't visited Silvia's excellent website before) go have a look asap. DepMin José Serrano is one of the key figures in Ecuador mining right now, and his words must be taken into consideration.

As for my thoughts? Clearly the whole point of this is to get you to worry (and in "S"s case it's working). Ecuador understands that once the law is on the table rampant capitalism may take over with miners will feeling they finally have some sort of upper hand. The gov't doesn't want this; it wants the industry to feel (or at least look) subservient to the country. Once the new law is passed (and yes, it will be good for the PPS of Ecuador mining companies..I expect immediate added value) those that wish to stop share prices going too high will immediately start banging on about the WFT, and how it's all uncertain, and how they could screw us all at any given moment, and this and that and the other. Fine.

Be clear that the tax will not be a blanket once-and-for-all "gold 1000 and done"...it will get reviewed annually. It won't be inhibitive to the sector, because otherwise Correa&Co won't get the jobs and fiscal revenues they're looking for here. It will be done on a case-by-case level with each company. It's likely work very much like the royalty "tax" and not much more. The key to it all is where the base line is set, and as it can't be lower than the spot price and will be adjusted annually there won't be much to truly worry about. As an aside, note that Ecuador's income tax rate is relatively low at 25% (e.g. Peru's is 30%). Under a "21st Century Socialism" ideal, if you don't expect the high wealth earners to pay more than the lower echelons you need to think a bit more.

Finally, if the industry refuses to commit because of uncertainty in the law, you'll quickly see the gov't out saying calming things about the WFT. Bottom line is the Correa gov't wants Ecuador's mining projects to make money as much as the miners do. See the forest for the trees, please. Those with an interest to make you worry will make you worry (and big miners prefer to buy junior miners cheaply than expensively...chew on that one). But it will be tempest in teacup stuff. And thanks for the mail, S. All correspondence appreciated.

"Ready made opinions can be distributed day by day through the press, radio, and so on, again and again, till they reach the nerve cell and implant a fixed pattern in the brain. Consequently, guided public opinion is the result, according to Pavlovian theoreticians, of good propaganda technique, and the polls [are] a verification of the temporary successful action of the Pavlovian machinations on the mind."

"The continual intrusion into our minds of the hammering noises of arguments and propaganda can lead to two kinds of reactions. It may lead to apathy and indifference, the I-don't-care reaction, or to a more intensified desire to study and to understand. Unfortunately, the first reaction is the more popular one."

Joost Meerloo, Psychoanalyst, Author, 'The Rape of the Mind' (1956)

Did you hear that the Peru general strike on Wednesday was a complete failure? Yeah, thought so. According to what was reported on Alan's mini-me Jorge Del Castillo, 98% of people went to work on Wednesday. But scratch the surface and the stench of bullshit comes a-wafting through. Del Castillo actually said that in the Lima Metropolitan region 100% of public service workers went to work, though late arrivals were not penalized. Also, 93% of private sector employees in the Lima+Metro region were at work in the morning, and that number reached 98% later. This means that according to the gov't, if said employee decided to protest by not going to work in the morning and turning up for an hour after lunch to punch their card, they were there all day doing da busy beaver.

But the biggest hole in the argument is the "Lima and Metro region" thing. The lapdog mainstream journalists tied took the words of Alan, Del Castillo and the rest of the crew and changed into the following headlines:

That took four minutes of Googling, and there were hundreds more (no exaggeration). As usual, both national and international press (equally guilty) think Lima is the only place that matters and the rest of the country can go hang. But here are a few eye witness reports of what happened on 9th July in "The Other Peru", meaning that tiny little inconsequential area that lies outside of Lima+Metro and holds two thirds of the population. Five cities in the interior, five reports of various lengths, edited by Otto from the originals (if you speak Spanish, don't bother with my translations; click on that link and see for yourself):

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Ancash"In New Chimbote the strike was strong, there was no movement until the beginning of the afternoon."

Iquitos"In Iquitos the strike was impressive....I have never seen so many people parading in the streets. I think that during the march, peaceful and without attacks or aggression, the whole of Iquitos was there, as from my hotel i watched for a full hour people passing and waves and waves of demonstrators with different flags and representations.

Cusco"Today in Cusco I walked to the centre of town. I would like to have shown those that talk about "colleagues that people are not going to work out of fear", "transport workers that don't go out for fear of attacks on their vehicles", "markets that don't open for fear of ransacking" etc etc the banners and flags on show, for example:

Ica The strike is very significativea) because it comes in a zone that is considered a model of agricultural export progressb) because it is in a (every day less) traditional APRA stronghold region. The current President of Congress is from Ica.c) because it is in the zone hardest hit by (last year's) earthquake.

Huancavelica"Once again Huancavelica is hard hit. The strike has been total in the capital city. We have been informed that between seven and ten thousand people marched in the streets. This is an impressive figure if you take into account that the city has a population of just 40,000.

So can somebody tell me how the association of ice-cream manufacturers of Cusco represents a cornerstone of Alan's "radical conspiracy"? For crying out loud, how the merry hell can all this grassroots disgust at the government and policies of the Alan Garcia government (presidential approval rating 30%) translate as 2% of the population?

The answer is "it can't", of course. And these problems won't just go away if Garcia, Mini-me and all the APRA tribe (helped along by a compliant media) sweeps them under the carpet. A prime example of this are the strikes at the Cerro Verde copper mine and the Shougang iron ore mine that are on for next week. The act of declaring the recent miners' strike illegal (again, whatever that means) stopped the protests by instilling the fear among workers of losing their jobs. But that doesn't mean that people are happy. The two mines in question simpy find another way of making their voice heard...then this strike gets declared illegal, they go back to work, another strike is called, lather rinse repeat.

But repeat until when? Do we have to get to the point of a bloody social uprising before anyone listens? Evidence seems to suggest that the answer is "yes". Case in point being Puerto Maldonado, where the demonstration turned nasty, the town hall was set on fire, municipal govt officials were threatened with bows and arrows (and the locals know how to use that weapon, be in no doubt) and 21 police ended up in hospital. What happened next was a gov't party rushed to the scene, talked with the unhappy groups and arranged for much needed social relief for the area. To quote a local policeman who was held hostage until the gov't suits arrived, "It's pitiful to note how places in extreme situations are (suddenly) given priority."

Peru is heading for real trouble sooner or later, mark my words. If this APRA gov't does not look back at its own roots and begin a social (with a small "S") program of wealth redistribution very quickly, the protests will return and become more militant. They are not organized by coup plotters and terrorists...that's pure Goebbels-type propaganda lies and bullshit from this most arrogant of presidents. Peru is growing, but it's leaving its own people behind. This is nothing short of criminal. Alan Garcia, j'accuse.

I got several mails this week after posting this little line on Wednesday........

Expect Ecuador's new mining law to be published next week. That's good jungle drum juice. Don't put the cart before the horse, boyz.

.....and basically the mail enquiries were a variation on the same tunes of "is that true?", "how do you know?" and "is that reliable?". So a word on how rumours work down here, and here are three bullet points on the subject (in no particular order).

When it's politics involved there are no dead certainties. Delays happen, last minutes changes to Presidential schedules a hundred other things.

More important is the quality of the intel. After a few years in the region you get inside an information circuit (or maybe better said two or three of the thousand circuits), and after a while inside that circuit you get to know which source is totally trustworthy, which is a bit of a BS merchant who sometimes comes up with the goods, which needs to be double-checked, and all flavours in between.

A lot of info which ranges from open secrets to half-baked BS scandal fodder passes this desk. A lot. With the blog, I basically take the same attitude as with my personal contacts, i.e. if it's not worthy of passing on, it won't be passed on. If it's what I consider good intel, then I'll mention it. In the end it's my call and the buck stops here.

So in the specific case of "Ecuador mining law coming out next week", nothing has changed on that one since last Wednesday and I fully expect it to happen, probably later in the week once Chávez has come and gone from Ecuador (the H man visits Tuesday). To give a bit of background, I understand that Correa wants to meet with Chiriboga to discuss a couple of items contained in the draft before the final law is published, pomp and fanfare and press conference and the whole nueve yardas. So once the Muffin has his chat with Galo, the green lights are on.

Would I bet 20 bucks that the law hits next week? Yes, no doubts. I've heard from three separate places that it'll happen, one is particularly trustworthy and duplicity is unlikely from at least two of the three. Would I bet my mortgage on it happening? No, don't be stupid. This is LatAm. Relax and smell flowers.

7/11/08

Poor old Hugo, he just can't win. Even when he does the right thing, invites his new best pal Uribe over for tea'n'buns and talks integration, signs trade deals and generally does what the world wants him to do, Reuters still puts the boot in and says "it won't last". Lamentable journalism from Brian Ellsworth, yours for the viewing by clicking here.

As for the London Financial Times, they're quick to point out that Caracas has too many cars, the plan to convert them to LPG (natgas) just won't work, the cars are too expensive, too popular, get more expensive after buying them so that's stupid....and basically it's all Chávez's fault. Natch. Benedict Mander is usually better than this.

Over in Colombia the "Betancourt Backlash" has started right on time, with people throwing crits at her for the way she's been acting recently. OH GIMME A BREAK! If you'd been held as a hostage in the middle of the jungle for six years, wouldn't you need a few hours to adjust, too? Cut the woman some slack, will yas?

In Argentina(I'm loathe to mention the place frankly, but here's a snippet) Klishtina has decided she now knows all about wheat and cows and things and auto-qualifies herself as an agro expert. It really takes something to be a worse President than Alan Garcia, but she's managing to beat him out quite easily right now.

Finally put a whopping big red flag against the name "Copper Mesa", which is the new way the scum at Ascendant Copper (acx.to) have found to disguise their disgusting past. The trick is to change the name to Copper Mesa, thus pretend not to be associated with the Ascendant Copper that ran a campaign of terror in the Intag region of Ecuador, trying to bully its way to a copper mine. Ascendant rightly got kicked out of Ecuador and are now trying to get going in the USA. I sincerely hope they go bankrupt, and as soon as possible. For more details, google "ascendant intag" and see for yourself (very interesting youtubes of Ascendant thugs beating up locals available). The ticker for Copper Mesa is SUX ...sorry, that's CUX.to. As in CUX socker.

How am I supposed to make this a "LatAm only" blog when the middle East and the US markets are rocking the whole boat? So that said, here's how i see the VERY short term. The Israel/iran missile thing becomes false alarm-y over the weekend, the dollar rebounds Monday. From that basic scenario:

Oil drops back to $140/bbl (prelim target)

Gold is peaking today and will get whacked Monday (925 again?)

USD index, currently under 72, rebounds towards 73 quicktime (in fact, I believe defence of the USD is the centre of the whole darn ballgame, and the Central Banks aren't likely to stop buying dollars now...au contraire, mon brave).

Therefore, I'm taking profits in short term metals plays that have popped nicely (CSI.to selling the rest if volume picks up, FAN.to, JAG, a few other things to tidy up the trading port). In general terms, I will have goodly cash on hand over the weekend to play the moves Monday. To balance this a bit, I'm buying a slugette of PCU. Now the sillystuff around the 3-1 stock split is over, the stock is a nice hedge long.

Also, buying NETC here. Keeping the faith in this great value Brazil telco/TV/tech play. The Bovespa has been severely slapped around recently as the hot money tides goes out, but the locals know that tides roll in afterwards, too. And so do I.

NB: Long term port remains totally untouched, FWIW. No panic here at all, just a bit of capital preservation hip-swivelling.

Remember Yidis Medina? Yeah, that one. The corrupt congresswoman who accepted bribes from Uribe to vote his way and then repented and ended up convicted of it all? Yeah, that's right...her. I wrote about her here, and then here, too. Well just when you thought Latin America couldn't get any more kafka, Yidis decides to pose naked for a Colombian magazine. Here comes one of the photos from the snap-session, and I therefore advise that those of a nervous disposition change channel immediately.

If you feel like it, you can click the photo to enlarge. All I can say is "the lady needs the money". A stranger way to upstage the Uribe/Chavez meeting today I cannot possibly imagine. You can see the rest of the photos at the magazine site right here.

Here's an update on two of my favourite charts. Less words more pictures this time.

The CDNX:Gold ratio (which shows just how cheap the Canadian Venture index (and by inference the juniors miners) is compared with gold. This chart could also be named, "Just when you though it was safe to........".

(click to enlarge)

With gold hitting U$961 right now (go go w00t w00t!), these companies have just gotta catch a bid eventually. The second chart is the fave rave Gold:Oil ratio, that shows how many barrels you can buy with an ounce.

(click to enlarge)

As you can see, in this case as of last night things are getting better. This morning both gold and oil are zipping upwards.

Bottom line: gold is recovering, but the juniors are still coughing up blood. I noticed Gold Fields' CEO Nick Holland with a report this morning saying "free flow cash is new crowned king of the gold industry", and that sure looks true when you pick the junior corner apart. So with a suppressed sigh under the breath, I leave you with a quote:

"Time, that aged nurse, rock'd me to patience."*

*props to the first person who writes in with the author of that quote

7/10/08

Long post coming up. Plenty of links too. This morning I got a mail from a dude named Peter who asked me the following:"....i read in a earlier blog post on "incakolanews" dated back in April 30 where you discussed different copper producers and other mixed metals producers and among these you mentioned a company i`m currently invested in myself, namely "Gold Hawk Resources". I have held this stock for about a year or so and I'm not sure if you`re updated on what has happened in the last couple of months but basically their operations at the "Coricancha" mine in Peru have been suspended due to a ground displacement situation and they are currently in the works of finding a new tailing handlings area so that they can go back into production again.

I was just curious if you have any thoughts about this company and where it is heading in near future? the stockprice has taken a real hard hit as you might know and is currently trading at $0.08cents...."

Firstly the background. Gold Hawk Resources (CGK.v) (here's the link to the company website) is a small miner with the Coricancha mine East of Lima as its main asset (map here). It's a polymetallic mine, producing gold, silver, zinc and lead. There is a long history of mining there, and CGK took over the mine a couple of years back, refurbished the processing plant and ramped up production starting 2q07. Things didn't go as smoothly as they'd imagined in 2007, what with one thing and another, missing spare parts, delays on lead times for equipment, delays training up new staff etc etc, but at the end of 1q08 they'd finally just about got their mojo together (here's the 1q08 results PR), and by all accounts by May this year even had the important and very profitable BIOX gold circuit running to near optimum levels at long last.

Things were looking good when suddenly CGK had a very large slice of bad fortune. Its tailings dump showed signs of ground displacement, and because of the risk of wall collapse (that would have been quite the disaster for both the company and the local environment), they immediately stopped work. So the cash flow dried up, the stock price went into free fall, and as a result CGK has just recently gone to market with a placement to raise $3.3m worth of funds by selling no less than 55m shares at 6c a shot. Quite the fall from it's 30 to 50c range of last year.

ow! ow ow! owowowowowowowow!

It's all a bit sad, really. I like the company, and more importantly the locals around the Coricancha mine like CGK, too. In the short time Gold Hawk has been there it has turned a defunct operation that had rather shady and unloved previous owners into a working mine employing up to 600 people at international standards of work (good safety, high salaries for Peru, all the enchilada). I mean, if another less scrupulous mgmt team had been in the same situation as CGK when the tailings wall showed signs of slippage, they might have "risked it" and continued operations, but CGK has been badly castigated at market for doing the right thing.

So it's clear I have sympathy for the company. But the important thing is whether CGK can get over this run of bad luck, turn things around and make Coricancha a truly profitable mine, for their own sake, the sake of their employees and the sake of shareholders. The good news is that all is not lost. Although the stock seems to have been whacked around by some naughty shorties recently, the company first managed to get a bridging loan from one of its prime financing partners, and however horribly big the share offer is it looks like CGK will successfully get its hands on the $3.3m it needs to tide itself over. So the financial side of things is bad but not awful right now.

As for the plans to get out of this mess, there are two things to point out. Firstly, the company is building a new tailings dump that will be ready in around 16 months time (if memory serves). But until it has a place to put the tailings waste it can't start mining again. Obviously, nobody wants to wait that long to start mining and producing positive cash flow again, so right now mgmt is looking at several different ways of managing tailings in the interim so that they can start up operations again. The company didn't want to go into too much detail with me on this (cos the negotiations are ongoing and they don't want snarky dudes like me ruining things for them, I suppose), but one of the options seems to be "renting" tailings space at another company's pond. Although this sounds like a quick'n'easy solution at first light it does have environmental paperwork to do that could slow thing down, so I have to stress that right now this is just one possibility and several other ideas are being examined by the company. But it does show they're thinking, right?

So anyway, where do we stand right now? As I see it if CGK can secure the necessary financing (looks likely) and IF they can find a temporary solution to the tailings problem (perfectly possible) then the company can get back to work. And if (if if if...lots of "ifs" I know) it can get back to the 600tpd tonnage it was processing before the caca hit the ventilador and get the mine running the way it's supposed to run, by my rough reckoning they'd be churning out over 3,000oz of gold a quarter as well as over 100,000oz silver and enough lead and zinc to pay the operating costs at the mine.

So as you can see, even by this very ballpark look at things the mine has the potential to be very profitable. The share count has gone to 226m outstanding (once the placement is done and dusted), so the dilution is now a significant problem. But all the same, those kind of production figures noted above would put 1.5c as a perfectly logical quarterly EPS, and with the stock currently at 8.5c, if (if if if) CGK can pull in an annual EPS of 6c that 8.5c share price would be confined to a dark moment in the company's history.

So there you have it; a rundown of the current state of affairs at CGK. You can find more info at this link to the very latest company presentation, too (dated June 26th). I'd only like to add that I'm really rooting for CGK here, if only because they've been very good with the people in their region of Peru and the respect CGK has shown the locals has in turn won the company much respect with the people that really matter.

happy crew

Or in other words, CGK is a bunch of good guys, and it'd be nice to see them get the good result that they deserve. I do think it's a buy at this level...not a doubt. However this is most definitely a high risk/high reward stock and you should not bet a dime more than you can afford to lose on a play such as CGK (hey...it's literally a penny stock...let's not delude ourselves, eh?).

But I'm going to leave you by re-printing a mail that CGK's IR guy, Jason Mercier, sent me today. He's given me permission to publish it, by the way. This gives you a bit more info about what's going on right now, and although it's biased to the positive (dude...he's a IR guy...it's his job, ok?) it's all fair comment. Have a good one, and feel free to get in contact with Jason if you have any further questions...he's a helpful dude. Tell him Otto sent you ;-).

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Very good to hear from you. I have great respect for our shareholders who have been extremely patient as we work through first managing the ground displacement issue and now as we prepare next steps. A couple of large sellers have suppressed CGK’s price in the past several weeks and the current price does not reflect the enterprise value of a high-grade, narrow-vein polymetallic property with 100+ years of mining activity. One positive result has been some new shareholders and continued strong Bid volume (see the close today). We have solid labour relations, employ our miners directly and despite almost daily visits from government enviro testers over the past year, we’ve proven that this mine and operation can be run at an international environmental standard. All metallurgical issues have been sorted out and recoveries – including gold – had reached at or above target immediately prior to the May 9 announcement. The shutdown was a difficult decision but that proactive step also helped retain the company’s credibility with other stakeholders.

In addition to the “no news is good news” about ground displacement (meaning, it has slowed significantly and the geotechs advise minimal risk at this point), the key pieces of information to glean about CGK at the moment:

1.. Our US $2.0 MM Bridge announced early June was with Auramet out of NYC. Auramet did their own due diligence and is one of our two primary lenders. So, financial support from an existing lender that not only understands the mining industry and our company but is backed by geotechnical data. Good.

2.. Our discussions with government Ministry of Energy and Mines has so far borne fruit with an agreement to use an accelerated process in establishing a new long-term tailings area at Chinchan, 30kms from our plant by rail (and note that the empty cars returning from the coast rumble right through our plant/tailings area). A clearer future and government understanding and cooperation. Also good.

3.. Private placement underway is expected to close soon. This shows continued support in the investment community. More good.

Next steps: We are working our way through discussions that involves a number of stakeholders, and although we have driven much of the information gathering to date to argue the case, we cannot fully control a process that involves local farmers (and an irrigation system that pumped up 40,000-litres/day onto the hill above our plant), Ministry of Energy and Mines, Ministry of Agriculture, Ministry of Transportation, the main railway running to the interior from Lima and serving mostly industrial users, all area municipal governments, the Rimac River (a drinking water supply) and its various stewards. And maybe the hydro utility across the river. There is risk but the company has shown that it is capable of managing the risk so far and has taken the right action.

The news flow – including a timeline and budgets once the estimates are in hand – will continue and we are taking the necessary steps that will lead to the company going back to production. Stay tuned.

Bloomberg is running this story today about the difference between common and preferred stock of Petrobras (PBR). Go have a look at the full report, but here's how it kicks off:

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July 10 (Bloomberg) -- The best trade in Brazil may be buying preferred shares of Petroleo Brasileiro SA, the nation's biggest company, and betting its common stock will fall after international investors pushed up prices 19 percent since March.

Common shares of the Rio de Janeiro-based company, the world's fourth-largest oil producer by market value, cost 22 percent more than its preferred, the biggest price difference since at least 1994, according to data compiled by Bloomberg. Petrobras, as the company is known, rose to a record in May after announcing the largest oil discovery in the Western hemisphere in three decades.

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All very nice and and arbitrage-y, and certainly goes with my view of the stock laid out in previous posts like this one and this one, too (there are others...go check).

PBR 3 month chart: Round trip anyone?

But as the Bloomberg report unfolds, the whole hyped-out Petrobras trade gets ever-so-gently rubbed into the noses of investors who bought in to all the recent BS about Petrobras (PBR), and comes to the subtle-put point in this section:

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"Foreigners like common shares,'' said Bruno Garcia, who helps oversee the equivalent of $5.5 billion as a hedge fund manager at BNY Mellon Arx in Rio de Janeiro and only holds preferred stock. "That's all that's going on.''

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So now that Otto translation promised in the title. Ready?

YOU GRINGOS ARE STUPID

That's what Brazilians think of you. Live with it. Thank you for your attention

By way of a quick heads up, Hugo Chávez is embarking on a round of diplomatic encounters this month. Tomorrow, Alvaro Uribe is visiting Venezuela, meeting with the H man and they're going to do some very public kissing and making up. Then next Tuesday, Chávez visits the Studmuffin in Ecuador (presumably to try and smooth things a bit between the muffin and Señor Dubious Past). Then later this month (the 22nd to be precise), Chávez is off on a trip to Russia to do general diplo things and presumably highfive with stakeholders of RML.v.

But here's the most interesting development today, and I'll bet you a full US dollar that you hear squat about this in the English media (or it's spun in a way that reflects badly on Chávez). In a meeting yesterday, Chávez made comments about tomorrow's march planned by the Communist Party of Venezuela (PCV). The PCV is protesting about the visit of Uribe to Venezuela and how he's not wanted here and how he's an illegitimate Prez and all that stuff. Here's a link to what Chávez said to them. now comes the Otto translation*:

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"The PCV has organized a march to oppose the visit of the President of Colombia. I invited the President of Colombia.....in order to make peace with Colombia and avoid war at all costs. You can have your march, but I don't remember the PCV marching when Bill Clinton, the President of the USA, came here! Because (the PCV) supported Caldera (Otto note: President Caldera, previous to Chavez, was elected in 1993 with the support of the PCV). These are truths that must be remembered, to be thought about and put in place."

He then accused the PCV of being holier than thou, by using the phrase "more Papal than the Pope", and continued:

"We are not going to war with Colombia. I have invited the President of Colombia to shake his hand, to talk and to look for (regional) integration, with respect for one another, because Colombia is a sister state. And we are obliged to understand the gov't that there is in Colombia. I am a Head of State, and as such I must act."

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So, Chávez slaps down the communists in his own country, defends Colombia's Uribe and wants peace and harmony in the region. Spin that, Oppenheimer. Like I said, don't expect this little speech to make it on Fox News tonight, dudes. You really are told an immense amount of total bullshit about Chávez, y'know.

Big moves in nickel, alu and the rest of the non-copper base metals, too. And damn straight! This couldn't continue. How to play it? Here are a few suggestions.

I scream Fortuna Silver (FVI.v) to you once again, and I'm happy to say that a friend picked some up at $1.79 this week after reading this blog (I'm jealous, cos my avg is $2.05).

Farallon (FAN.to) got beaten up in this Zn downdraft, too. With sub-70c prices available and a clear ceiling at 80c, even if you don't like it as a long term hold the way I do, there's a clear 15% trading profit to be made here.

Also a great trade would be Breakwater (BWR.to), the extremely beaten up miner I mentioned as a possible Zn vehicle a few days ago, as it's very much a zinc play in all the Americas.

For those with access, Volcan in the Lima exchange (VOLCABC1) is another obvious beneficiary of this metals rebound.

Another, smaller miner in the Lima bourse worth checking out is lead miner Raura (I can't remember the ticker off hand, but check it out at the lima exchange website, www.bvl.com.pe). It popped out from nowhere with a very large dividend payment this year, and is likely to make that a repeat policy now that the profits are rolling in.

In this press release today, Rusoro (RML.v) states that it is delighted about forming a 50/50 partnership with the Venezuelan gov't to produce at its assets recently acquired from Hecla (HL). Well, we pretty much knew that Hecla was given the "sell out or lose it" speech a few weeks ago, because the U$20m-plus-5m-shares selling price was ridiculously low for a profitable gold mine that expects to produce 100,000oz gold this year.

In the press release there are a couple of other weird things, too. Weird thing number one is that this new 50/50 JV with the gov't will not take over any of the existing Rusoro assets. That's odd to say the least, cos the whole idea of the Hecla purchase working well is that the Camorra processing mil could be upgraded to handle large production numbers from the new RML deposits currently being proved up. Weird thing number two is that this was announced as soon as the Hecla purchase was formalized. If this isn't a signal to the other miners in the area, then i don't know what is.

For the record, I've never liked Rusoro as an investment. I said it when they were at $2.40 (time when they took over the Gold Fields assets last year) and that hasn't changed. The enormous recent share dilution at the company (paying for acquisitions...also not averse to awarding mgmt stock options) and the political risk factor made it my idea of "not an investment".

However, this might have changed. In recent weeks Peter Hambro has taken a large stake in the company, the exploration program of no less than 300,000m of diamond drilling (which must be some kind of world record for a small miner) has started to return very nice numbers, and the stock has been beaten down to its present level. I mean, it's a gold miner with big assets and a deal with the gov't, so there has to be a bottom somewhere, right?

The prospect of a 50/50 development with the gov't brings it some sort of political stability. It also opens the prospect of expansion at (let's say) "favourable financial terms" with the gov't as prime lender of RML's part of the deal. But even though it does suddenly look good on paper, RML shouldn't be a big bet of anyone portfolio. There are obviously...and I mean OBVIOUSLY political shenanigans going on here, and when you mix dubious politics with a working gold mine history has shown how bottom line results can be severely and mysteriously affected.

7/9/08

So yesterday I wrote this post, trying to predict how the much-vaunted Peru general strike would pan out. Let's see how close I got, by checking down the list of ten items and awarding a maximum 10 points for each category. Off we go!!!

1) Unions grab the mikes early morning, and say turnout is near 100%. TV cameras capture row after row of jam packed full buses behind shoulder of triumphant union leader.Otto scores: 8 points. The TV cameras didn't catch the buses, but they were full all right. The union leader? Yeah I win on that one.

3) Bus drivers strike as from 10am after they've collected their prime early morning commuter fares. City grinds to a halt for 6 hours and gov't spokesman suddenly looks stupid.Otto scores: 6 points. Yep, the buses did that, but the arrogant gits in gov't decided not to comment til the buses went back on the road, therefore missed the huevo-en-cara

4) Buses suddenly all go back to work the very same moment all the workers leave their offices.Otto scores: 10 points. Natch. Too easy

5) Big noisy demo by people wearing same coloured things and carrying same coloured flags. Fireworks. Police watch on bemusedly and think how they're getting double wages for this.Otto scores: 4 points. Noisy yes, big no. Not in Lima anyway. Only 3,000 turned up for the fun, and they all wore different things. Here's a photo.

6) Provinces much harder hit. South and Central/East Peru closed down. Rocks litter the streets, and militants throw stones at taxis.Otto scores: 9 points. The taxi stayed off the streets entirely, thus the stones weren't thrown that much. Apart from that I nailed this one.

7) Police and army kosh a few communists round the head for fun. Two or three end up in hospital.Otto scores: 3 points. It was worse than I thought. 216 arrests in total, and 21 police officers injured when a demo in jungle town of Puerto Maldonado turned into a mob attack on the town hall. Hall set on fire, seven types of shit ensued.

8) All round the tourist circuit (namely Islas Ballesta - Nazca Lines - Arequipa/Colca Canyon - Lake Titicaca - Cuzco/Macchu Pichu) bands of whining gringos ask the same "When can we move to our next destination?" question to tour guides blessed with saint-like patience, while the rest of the group tut tut about how it isn't the same at home and "why should they be complaining when we come over and spend all our money here?" and various other classic, predictable and moronic trains of thought.Otto scores; 10 points. I don't have any evidence on this one, but gimme a break...this one is obvious.

9) At nightfall, the President issues a statement saying that "the people have spoken and voiced their discontent. It is our job as a gov't to heed this voice" or some such shit.Otto scores: 8 points. Alan did the speech in the afternoon, but the 'vox populi' idea was incorporated in there.

10) Next morning everybody goes back to work. Nothing changes. Absolutely nothing. See photo.Otto scores: 10 points. In the obvious stakes, this one ranks up with statements such as "Pamela Anderson is not a virgin", "China is expanding rapidly" or "Cows eat grass". So see that photo again. Go on, look at it. Then the next time you hear Peru is growing at 9% per annum, think about it.

Yesterday the Constitutional Assembly (CA) passed a motion that states the final referendum vote must take place with 45 days of the end of the CA. As the CA is due to break up on 26th July, this means the referendum vote has to happen before September 9th, 2008 (if I can count to 45 correctly). So what with traditions and things, I'm expecting the referendum vote to happen on Sunday 7th September. Pencil that date in (don't ink it in).

The gov't report on the so-called "illegitimate debt" is due published on July 21st. Depending on the content and how President Studmuffin manages the issue, it has the potential to make waves in the international community, especially the EM bonds trading desks. Consider this a heads up.

Has anyone else noticed how every time Haywood raises its 'target price' (speech marks extremely necessary) on Aurelian Resources (ARU.to), the stock immediately jumps and then makes the Haywood price its strong resistance floor level? I propose naming this phenomenon "The Zaunscherb Line". Anyone second that motion?

Ecuador is generally approving of Correa's clampdown on Grupo Isaías yesterday, though many want to see the TV channels move from go'vt confiscation (now) to auction and re-sale back to the private market as soon as possible. The only wailing is coming from media sources with similar dubious banking backgrounds. Correa seems to have played and won this round, and if it weren't for the Ortiz resignation yesterday it would be a full-on win. But bonds are recovering too, as new girl Wilma made the right pro-payment sounds last night.

Expect Ecuador's new mining law to be published next week. That's good jungle drum juice. Don't put the cart before the horse, boyz.

Sold the trading PCU at a touch under $102. That pays for the pre-prandials tonight.

Looks like I got this one right. And although I didn't mention it yesterday, as well as the chunkette bot at $95, when it finally reverted and made its afternoon move I grabbed some more at $96 and small change. PCU then proceeded to act like that submarine pic from yesterday and is now $100. I'll take profits today. Dee Brown sums it all up.

I repeat, this small trading chunk is nothing to do with the long term position in PCU that started at $25 or so a few years ago. Trading is fun and that's why I do it, but it's not where the real money lies....that comes from buying and holding true value stocks.

Here's a checklist of metals stocks featured in this humble corner of cyberspace have been slapped around by the recent sell-off. The vast majority of these are long-term vision longs, and as such are not my idea of sells during the current dip. On the contrary, I'm being all stubborn and stuff and saying that they're real value right now. That's cos they are. It's all too easy for an analyeast to say that a stock at $2 is a buy, but then it drops to $1.80 and the reply comes "wow! really cheap now...buy more!". But I try to be as straight as possible with my calls on this blog, and I'm perfectly happy in these cases to fall into the cliché, re-recommend them all and point to a future where all of them will triple, quadruple etc etc.

So all the following names are recommended buys. It's not a complete list, but more of a headsup compendium list of those junior and small producers in the region that offer compelling value at this time. Included is the name, the ticker, the current (beaten down) price and the metals exposure of the company, to give some idea of the areas they're involved in. The list is in no particular order.

It all hinges of the recovery of their end products, of course. Copper aside, the base metals complex has been beaten back in recent weeks, precious metals have corrected somewhat too, costs have been rising for producing miners and juniors with projects. All this reflects in the stock prices. However, I remain totally convinced that all metals, base and precious, will recover from this slump. If you don't agree with me, then fair enough. Just remember my position on these things in a couple of years time. We'll both see who was right*.

UPDATE: A reader just mailed and wrote "you forgot 'total credit crunch and no funds available' from your list of reasons why juniors are in the dumpster". Well, it's not a fundamental reason, so I didn't put it in. Of course the market woes have rubbed off on these companies, but what really matters in the long term is that the projects are economically viable. All the above companies have compelling fundamental stories to tell. That's why i like them.

7/8/08

If you're reading this you have a computer. If you have a computerit's a 99% certainty that you don't have a clue about what this photo really means.Have a nice day.

So Wednesday 9th July is upon us, and as well as being Argentina's Independence Day (women spend all morning making salad, men spend all morning cooking half a cow, table eats salad and half a cow) Peru has decided to take the day off as well by calling a National Strike. This one is all about the lack of salary rises and the rise in the cost of living. But if it's anything like the normal ones in the Toledo/Garcia years, what we have in store isn't much to get heated up about. Choose from the following smorgasbord:

1) Unions grab the mikes early morning, and say turnout is near 100%. TV cameras capture row after row of jam packed full buses behind shoulder of triumphant union leader.

7) Police and army kosh a few communists round the head for fun. Two or three end up in hospital.

8) All round the tourist circuit (namely Islas Ballesta - Nazca Lines - Arequipa/Colca Canyon - Lake Titicaca - Cuzco/Macchu Pichu) bands of whining gringos ask the same "When can we move to our next destination?" question to tour guides blessed with saint-like patience, while the rest of the group tut tut about how it isn't the same at home and "why should they be complaining when we come over and spend all our money here?" and various other classic, predictable and moronic trains of thought.

9) At nightfall, the President issues a statement saying that "the people have spoken and voiced their discontent. It is our job as a gov't to heed this voice" or some such shit.

First you need to get into a bit of context her fixation with trains. The Kirchner legacy is destined to be the "tren bala" (English, "bullet train") that will connect Mar del Plata in the South of Buenos Aires Province to the Capital itself, then Rosario and Cordoba. At a cost of some five billion (yes, that's a "B" again) dollars, and funded by a sovereign debt emission.

The whole thing is ludicrous from any angle you like, and reminds me of those electrification programs John Perkins sold the little brown people back in the 1970s (see "Confessions of an Economic Hit Man" for more details). For a start, the current Argentine rail system is so run down and disused that putting a spanking new bullet train in the middle of this inertia is a bit like giving a working i-Phone or two to the lost tribes of Papua New Guinea. This excellent website shows that by foregoing the U$5Bn bullet train program and its 1000km of railway and investing just U$3.1Bn on upgrading lines and "normal" rolling stock, Argentina could get itself 18,000km of very useful and workable rail system. Check the two maps and decide for yourself which plan is "groovy" and which one is "square".

On the left, U$5Bn. On the right U$3.1Bn. And useful. And needed.

So that's the weird train-laden background, so on to today's specific choo-choo weirdness. Klishtina's latest wheeze is a railway that connects one part of South Patagonia to the other and then on to Chile's Pacific coast, which to be quite frank is not a bad idea as the refurbishment needed for the existing infrastructure wouldn't cost more than a single wagon of the bullet train. But the speech she made to present the idea clearly came after a rather large bong-hit. Otto translates as Klishtina asked her audience to,

"......make a very great intellectual effort, to think beyond what is seen immediately or that which they show us or they tell us, to warn that we are living in an ever more complex world, that demands from everyone to have this vision, this different way of looking at things and the power not only to look, but also to see, and not only to read and know, but also to understand and comprehend."

I assure you it sounds just as spaced out in the original Spanish*. The babe's a pot head!Hey....look... the wild thing about it dude, is that it all makes sense. Now. Like yeah....explains all the mood swings, and the ....the.....the other stuff too....like....dude. Cos sometimes she's all nice and that....and then suddenly.... she just isn't.

Like.

After a heavy all nighter, Klishtina forgets to put on make-up for breakfast

So what we have is a Prez that wants us to make an grand intellectual effort to understand a smart, inexpensive and blatantly obvious way of activating the economy of southern Argentina, but just expects us to think nothing of wasting $5bn in public funds on her own favourite pet project that once running will fracture money, be as economically useful as a chocolate fireguard and won't even make the local airlines break into a competitive sweat, forget about the long distance truckers. Bipolar isn't even close. Pass the kutchie.... and no bogartin', sis.

Fausto Ortiz's resignation has put Ecuador bonds into a tailspin. Here's Bloomberg with the details, and here's a link to remind just how darned good my "take profits on Ecuador bonds" call was just a few weeks ago. It also has a photo of the infamous Ortiz. He looks like Penfold from Dangermouse, if you ask me. Toot toot!

Not feeling rock solid about it, but I've just taken a small position in PCU again, this time U$95 and small bits.

Colombia's Uribe is trying to get firmer ground between himself and Venezuela. He approves of the joint country plan to build a railway between the two countries. Not stupid of him, cos Colombia will benefit the most from bilateral trade.

Yesterday, the government "Agency of Deposit Guarantee" (AGD) raided and blocked the offices of two television stations owned by Robert and William Isiais, two brothers involved in a supposed banking rip-off in the country that dates back ot the currency crisis of 1998/1999. The brothers are currently on the run in....yep...you guessed it...the USA (Miami, to be exact). Needless to say, with a background of the Ecuador hoi-polloi and a extradition warrant slapped on their tushes by the current gov't, these Isiais dudes are not broadcasting much Correa-friendly publicity from their TC- Televisión and Gamavisión signals. Yesterday's TV station closures were part of a clampdown on the 'Grupo Isiais' holdings that stretch to a mere 195 separate companies. But no matter about the badasss brothers and their three zillion shady holding companies, cos the phrase "liberty of expression" is the one most heard around town today. Words such as "dictator" aren't far behind, either.

So Correa decides that this is the moment to send in the gov't boys and close down the assets owned by the brothers. Note the timing, people; 10 years after the supposed scam and just two months before the big bad constitutional referendum. And this has ruffled more feathers than Correa had bargained for, obviously, cos last night his Finance Minister, Fausto Ortiz, abruptly resigned his post in protest. According to the Agence France Presse report, Correa and Ortiz had a big slanging match in which Correa demanded that Ortiz filed the necessary documents for the TV station takedown, or get out. He got out.

two dudes inside a TV station in Ecuador, looking at a wall and holding big guns.

A replacement has already been found in the shape of Wilma Salgado, who was recently absolved by the Constitutional Assembly of suspected misuse of funds at the very same AGD used to close down the TV stations yesterday (oh how the world turns, eh?). But she's now been put in charge of running the country's finances by a Correa obviously taken aback by Ortiz's resignation.

And thus another weak link snaps in the Correa gov't, just weeks before the big referendum. Gotta be said this is not helping the gov't image in the run up to the decisive vote

This stock gets hit like this and you just move out the way. FCX is doing the same kind of movement, too. I'm not touching my LT holdings, but the small trading bunch bot yesterday was dumped at the bell. Good job too, cos right now the stock is U$2 lower at U$96.4.0

However, these wild intraday rides often throw up a short-term buy opportunity in PCU, so I'll be watch the market action very carefully in this stock today. The upcoming 3-for-1 stock split is giving the sillypeople chance to be silly, methinks.

Copper is down, but it isn't dying 17 deaths, either.

The broad markets will also dictate terms...that goes without saying, yeah? Every reason to look for an intraday bottom and buy a chunk later. PCU or FCX....whatever's your poison, dude.

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